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A One-Factor Bond Pricing Model Implies That Interest-Rates of All $d r ( T ) = \alpha ( r ( T ) , T ) d t + \sigma ( r ( T ) , T ) d W , \quad \forall T$

question 2

Multiple Choice

A one-factor bond pricing model implies that interest-rates of all maturities are driven by a single source of stochastic randomness. For example the system of interest rates may be described by the following equation: $d r ( T ) = \alpha ( r ( T ) , T ) d t + \sigma ( r ( T ) , T ) d W , \quad \forall T$ where $T$ denotes the maturity of different rates. A single-factor model implies that

A One-Factor Bond Pricing Model Implies That Interest-Rates of All dr(T)=α(r(T),T)dt+σ(r(T),T)dW,∀Td r ( T ) = \alpha ( r ( T ) , T ) d t + \sigma ( r ( T ) , T ) d W , \quad \forall Tdr(T)=α(r(T),T)dt+σ(r(T),T)dW,∀T

Definitions:

A One-Factor Bond Pricing Model Implies That Interest-Rates of All $d r ( T ) = \alpha ( r ( T ) , T ) d t + \sigma ( r ( T ) , T ) d W , \quad \forall T$